With Romania and Bulgaria given the green light to join the EU, lands of opportunity await city firms, reports Jon Robins


Let us hope that the Romanians and Bulgarians are more welcoming than the British press. News of the two countries being allowed to join the Euro club has largely been covered in terms of scare stories about ‘floods of Balkan migrants’. However, it could be that EU accession prompts a wave of pinstriped City lawyers travelling in the opposite direction to set up camp in Bucharest and Sofia.



Until now, Romania and Bulgaria have not been high on the agenda of globe-trotting law firms. But things are changing. Over the summer, Clifford Chance launched an office in Bucharest by teaming up with local law firm Badea & Asociati. It gives the firm a presence of 23 lawyers on the ground and joins a select group of foreign lawyers in the city, comprising mainly Linklaters, CMS Cameron McKenna and international firm Salans.



Is the timing of Clifford Chance’s move significant? Absolutely, replies partner Nick Fletcher. ‘What has happened is that the economy anyway has moved dramatically over the last three or four years. Even if accession had been delayed, we’d have still decided to have come here because that’s simply where the economy is at,’ he says. The firm is mainly involved in financing work and real estate, and is acting for the buyers of Bucharest’s landmark Charles de Gaulle Plaza building.



Mr Fletcher reckons that Linklaters was pleased its magic circle rival had arrived in town ‘because it helped them to have another well-known player in the market’. He adds: ‘It is always helpful to have lawyers of the same type on the other end of a transaction.’



It is a view that Linklaters is happy to endorse. ‘Having other firms in the market is actually making it better for us in terms of servicing our clients,’ agrees Michael Schilling, its Bucharest managing partner. The firm set up in the city on 1 January 2000. ‘Romania itself has always been for Linklaters not just a market in and of itself, but a base for our central and eastern European work,’ he explains. ‘We cover seven or eight countries from there.’



The population of Romania is 22 million which, as Mr Schilling points out, makes it the second biggest market in the region after Poland. ‘It seemed like a gamble back in 1999 opening up here when the Balkans was not an obvious place for a magic circle law firm,’ he says. ‘But our clients were coming and it has paid off well for us.’ The firm recently acted in Vodafone’s acquisition of Romanian and Czech mobile operators from Canadian company TIW. Mr Schilling cites the deal as an example of ‘how the East is now looking West’.



‘It is a transaction that is absolutely typical for us in one way but totally unusual in so far as we were doing the due diligence on a Western company as opposed to an Eastern company,’ he continues.



Bulgaria has roughly one-third the population of Romania and consequently has attracted less interest. However, there was excitement this month when DLA Piper hired Peter Valert, who headed CMS Cameron McKenna’s Sofia office, to launch its presence in the city. Camerons merged with 50-lawyer east European firm Hayhurst Robinson, consolidating its central and eastern European practice on 1 January this year.



Why did Mr Valert jump ship? ‘I didn’t agree with the merger and I was approached by DLA,’ he replies candidly. Why is Bulgaria significant to his new firm? ‘It is part of the strategy. We have a good network in central and eastern Europe, and lots of clients are looking at Bulgaria and Romania as the new territories of opportunity. I have worked in the Czech Republic, Hungary and Poland, and they’re all quite saturated. They are mature markets and there aren’t a lot of new opportunities, so people are shifting their sights to Romania and Bulgaria.’



The ‘hottest boom’, he reports, is real estate, but he also points to infrastructure and mergers and acquisitions deals work flowing from accession. ‘The government in Bulgaria has stabilised the country,’ he reports. ‘In the 1990s, it seemed as though apparently the country was run by the Mafia, but that’s since changed.’



David Butts, Camerons’ Sofia-based partner, says Mr Valert’s departure was a loss ‘because he was well liked’ but not strategically significant once the office developed beyond being a project base, which Mr Valert had set up while based in Prague. Camerons took that next step on the back of the £730 million privatisation of the Bulgarian telecoms operator BTC, in which it acted for private equity company Advent International.



The larger local firms in Romania do not appear fazed by the interests of international firms. ‘At the start, the local legal community was concerned that their presence might jeopardise opportunities for the locals, which is a normal reaction,’ says Ion Nestor, founding partner of Nestor Nestor Diculescu Kingston Petersen. The firm has 70 lawyers and is one of the largest in the country.



‘Romania is a country that opened quite rapidly in comparison with other countries,’ he continues. ‘My position was always to welcome foreign law firms. Of course, if you call me in two years’ time and we’ve had 20 more firms come in, I might have changed my mind but at the moment I think that we have benefited more than we’ve lost.’ One indirect consequence has been on fees. He points out that in Sofia, local commercial firms can only charge 60% of what they can charge in Bucharest. ‘That is due largely to the presence of London law firms in Bucharest,’ he says.



Fabiola Meister is a Romanian-born English-qualified solicitor who works at the other major local player, Musat & Asociatii. She reckons that accession marks a significant moment in the legal market. ‘Law firms in Romania view it very positively,’ she says. ‘The business environment will improve, there will be new investments, new freight channels will open, new trading of goods and services, and it can only be a very good thing.’ She previously worked at City firm Stephenson Harwood.



Ms Meister continues: ‘The EU will have in 2007 a market of 480 million consumers, and so we will have access to a much bigger pool of clients. We will also be able to attract clients who might have been a bit reticent to invest in Romania until they had “big brother” protections such as the EU. A lot of clients still feel Romania and eastern Europe is a risky market to invest in.’



Mr Nestor provides a sense of how much has been achieved and so quickly in terms of developing a legal market. He explains: ‘Under Communism… there was a degree of independence but from an administrative point of view we were reporting to the Ministry of Justice and the state had a certain control over lawyers. We weren’t allowed to create private practices but obliged to enrol in co-operatives.’



‘After the revolution, the barriers fell and we were allowed to open our own law firms,’ Mr Nestor continues. His own firm set up two months after the revolution. ‘My wife and I decided to change our lives, grab the opportunities that were opening to us and to the country. We went into private practice and established the first law firm.’ It was to take five years before the regulatory regime caught up with entrepreneurial lawyers and a framework for the legal profession was only introduced in January 1995.



UK lawyers attest to the fact that the Romanian profession is reasonably welcoming. ‘Happily, Romania has been one of the most open and accessible markets from an international law firm point of view,’ reflects Mr Schilling. ‘When I first went to see the union of lawyers at the Bucharest Bar back in 1999, I was told I was the first international lawyer to have come to see them.’



Bulgaria receives a more mixed review. One ex-pat lawyer says the Advocacy Act reads like it was ‘written by non-practising lawyers’. He explains: ‘There’s a prohibition on using the name of any client in any of the marketing materials even if the consent of the client has been given.’



So does the EU accession promise a new era in terms of international law firm interest in the markets? ‘Bulgaria has fewer than eight million people,’ comments Mr Butts. ‘There are some excellent firms which are happy to work on a fly in/fly out basis where they partner local firms. I could be proved wrong, but I don’t think the market is of sufficient size to interest the magic circle.’



‘Romania and Bulgaria are in a different position to other central and east European countries, where more of the major players were in the market before accession and there was a plateauing of business following it,’ reckons Mr Schilling.



‘Romania and Bulgaria are different in that the boom that’s taken place pre-accession has started later and seems to be continuing unabated, even though accession is only two months away. It looks set to continue after accession, and seems to be starting from a lower level. I think there is more growth potential for the market.’



Jon Robins is a freelance journalist